Appeal from the United States District Court for the Eastern District of Texas in case no. 99-CV-0451, Judge Leonard Davis.
The opinion of the court was delivered by: Dyk, Circuit Judge.
Before RADER, Chief Judge, PLAGER and DYK, Circuit
Opinion for the court filed by Circuit Judge DYK.
Dissenting opinion filed by Circuit Judge PLAGER.
This case presents the question of when a district court may reduce the "lodestar" calculation of reasonable attorneys' fees to account for the "amount involved and results obtained" or other factors. Although the district court here did an exemplary job, we conclude that two errors require a remand. First, while the district court may reduce the lodestar figure to account for the "amount involved and results obtained" and other factors in rare and exceptional circumstances, we conclude that the district court erred here by taking these factors into account after calculating the lodestar figure, rather than as a part of the lodestar calculation itself. We also hold that the district court should have used forum rates in determining the reasonable hourly rate for the lodestar calculation. Accordingly, we vacate and remand for further proceedings consistent with this opinion.
The United States has waived its sovereign immunity with respect to constitutional claims, including government takings claims arising under the Fifth Amendment. See 28 U.S.C. §§ 1346(a)(2), 1491(a)(1). The United States Court of Federal Claims has exclusive jurisdiction over such claims where the amount in controversy is greater than $10,000, § 1491(a)(1) (the "Tucker Act"), but shares jurisdiction with the district courts where the amount in controversy does not exceed $10,000, § 1346(a)(2) (the "Little Tucker Act"). In actions brought under the Tucker Act or the Little Tucker Act in which a plaintiff is awarded compensation for the taking of property, the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 ("URA") provides for the recovery of "such sum as will in the opinion of the court or the Attorney General reimburse such plaintiff for his reasonable costs, disbursements, and expenses, including reasonable attorney . . . fees, actually incurred because of such proceeding." 42 U.S.C. § 4654(c).*fn1
This case involves takings compensation claims brought by appellants
against the United States. On May 23, 2000, following the transfer of
their compensation claims to the United States District Court for the
Eastern District of Texas, Plaintiff-Appellant Ashburn Bywaters and
other named plaintiffs (collectively, "appellants"), represented by
counsel based in Washington, DC, filed an amended class action
complaint on behalf of themselves and all others similarly situated,
alleging that they were the owners of interests in land constituting
part of a railroad corridor (the "Chaparral rail corridor") that had
been converted for trail use by the Interstate Commerce Commission
pursuant to the National Trails System Act
("Trails Act"), 16 U.S.C. § 1247(d).*fn2 The Trails Act is designed to
preserve railroad rights-of-way by converting them into recreational
trails. Actions by the government pursuant to the Trails Act can
result in takings liability where the railroad acquired an easement
from the property owner, the railroad's use of the property ceased,
and the government's action under the Trails Act prevented reversion
of the property to the original owner. See Preseault v. United States,
100 F.3d 1525, 1550-52 (Fed. Cir. 1996) (en banc); see also Caldwell
v. United States, 391 F.3d 1226, 1228 (Fed. Cir. 2004).
On August 25, 2000, the district court certified a class consisting of
all persons who owned an interest in land constituting the Chaparral
rail corridor extending from Farmersville, Texas, to Paris, Texas,
that was converted to trail use pursuant to the Trails Act, and whose
claims did not exceed $10,000 per claim. On April 17, 2003, the
government stipulated to takings liability with respect to those
claims for segments of the Chaparral rail corridor in which the
railroad acquired only an easement.*fn3 From
2003 to 2009, the parties cooperated to determine the amount of just
compensation to be paid to the members of the class.
On July 31, 2009, the parties proposed a settlement agreement that resolved all issues in the case, except for the amount of attorneys' fees and costs to be awarded under the URA. The district court approved the proposed settlement after finding that the proposed settlement would secure 100% of the just compensation due to class members with eligible claims, subject to the $10,000 jurisdictional cap of the Little Tucker Act. Under the settlement, appellants' total recovery was $1,241,385.36, including pre-judgment interest.
Following settlement, appellants filed a claim for attorneys' fees under the URA, requesting attorneys' fees in the amount of $832,674.99, which included 2,119.69 hours of work from August 1999, when the case was transferred to the Eastern District of Texas, to December 2009. Appellants also urged the district court to determine the appropriate amount of attorneys' fees by applying market rates for the District of Columbia, where appellants' counsel practiced, rather than rates charged by attorneys in the forum where the case was brought (the Eastern District of Texas). In response, the government argued for application of the forum rule. The government also argued for the reduction of the fees claimed based on various grounds, including that the hours claimed were unreasonable in light of the government's stipulation to liability early in the case, and the fact that a fee agreement between appellants and their counsel provided for the award of attorneys' fees calculated at the greater of counsel's regular hourly rate or one third of appellants' total recovery.
The district court, applying Federal Circuit law, determined the amount of attorneys' fees to be awarded under the "lodestar" approach, i.e., by multiplying the number of hours reasonably expended by a reasonable hourly rate. In determining the lodestar figure, the district court first considered the hours requested by appellants and the government's objections and determined that only 18.2 hours spent drafting and filing an amicus brief were unreasonable. Accordingly, the court reduced the amount of hours requested by appellants by
18.2 hours. The court next determined that the relevant market for determining the reasonable hourly rate was the District of Columbia and applied the Updated Laffey Matrix*fn4 to determine the reasonable hourly rates for complex litigation. Accordingly, the district court determined that "multiplying the number of hours reasonably expended by the reasonable hourly rate using the Updated Laffey Matrix" yielded a lodestar figure of $826,044.19. Bywaters v. United States, No. 6:99-CV-451, 2010 WL 3212124, at *4 (E.D. Tex. Aug. 12, 2010) (hereinafter "Attorneys' Fees Order").
However, calculation of the lodestar figure did not end the district court's inquiry. The district court found that the factor of "amount involved and results obtained" was not adequately taken into account in determining a reasonable fee. The district court reasoned that the lodestar figure would yield an award of attorneys' fees that was 66.5% of the total relief awarded to appellants, which was "extremely high considering the amount at stake in this case and the actual results obtained." Id. The district court observed that "[o]verlooking the large disparity between Plaintiffs' award and the lodestar figure would only encourage protracted litigation." Id. The court also concluded that the work performed by appellants' counsel was "administrative in nature and did not require a high level of legal skill." Id. Finally, the court noted that the lodestar figure exceeded the amount calculated under the contingent-fee option in the fee agreement between appellants and their counsel, which provided that appellants' counsel would be compensated at either "the value of [their] professional services at [their] regular hourly rate or by multiplying by one third the amount recovered for the plaintiff class as damages, whichever is greater." Id. The court reduced the calculated lodestar figure by 50%, awarding attorneys' fees in the amount of $413,022.10.
Appellants timely appealed the district court's award of attorneys' fees. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(2).
Generally, our legal system adheres to the "American Rule" under which "each party in a lawsuit ordinarily shall bear its own attorney's fees." Hensley v. Eckerhart, 461 U.S. 424, 429 (1983). However, in certain categories of cases Congress has carved out exceptions to the American Rule and allowed for recovery of attorneys' fees. See Pennsylvania v. Del. Valley Citizens' Council for Clean Air, 478 U.S. 546, 561-62 (1986). The fee-shifting provisions of the URA are one such ...